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Scandi & Swiss: COVID-19 to drive a plunge in values

Given the uncertainty surrounding the impact of COVID-19 on the economy, the hit to real estate markets is still uncertain. The drop in economic output expected in the first half of this year, along with deteriorating investor sentiment will lead to rental values to fall sharply while causing a spike in property yields. But if, as we expect, the virus is contained within a few months, we anticipate a recovery in economic activity towards the end of this year. In turn, we have pencilled in stronger rental growth next year, along with a reversal in yield increases. The exception will be the retail sector, where structural headwinds will continue to weigh on yields and rents for some time to come, irrespective of COVID-19.

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